The important aspect of devising a business plan for any organization arises from the fact that conducting business in a new market is never an easy task. The importance of expanding business is very important for financial and market growth and this can truly be achieved by entering new foreign markets with potential. The current study is basically a business plan that is dedicated to identify the best strategy to enter a new market. In this case, the Indian market has been selected by the sunglass company. The feasibility report highlighted the positive and negative aspects of the market and it seems worthy to expand the market in. The business plan covers every micro and macro factors along with a SWOT analysis to understand and evaluate the steps that can help the company to achieve its objective of setting new business and expanding their market share in the global perspective.
Task 1: Examining driving factors of globalisation and consequences on businesses
1.1 Emphasis on the macro and micro environment in India
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According to Leininger, the market nuances change at the drop of a hat and businesses must resort to finding out various avenues that can help business expand and prosper. Global expansion is a method through which business can be moved forward. However, it is of absolute necessity that the correct market entry strategy is evaluated and then implemented. If the feasibility study done on the Indian market is evaluated, it can be seen that India does provide the benefits of having political stability, economic progression and growing sophisticated human population. These factors are prime factors that made the selection of Indian market reasonable.
The micro analysis of Indian market suggests the extremely tight competition that exists in the fashion and lifestyle industry in the country. On one hand the market shows tremendous growth in the eyewear market, but the existing brands make it a tough fight for newer companies to establish their business. As per reports, the eyewear market in India is expected to rise from $230 million to $430 million in the next three years. The rise is expected due to the factors such as changing preferences and rapid growth of standards of living in the country. This factor allows a clear explanation about the potential in the Indian market that can be tapped by the company.
Even from the macro environment perspective, the vast population in India and the major part of the population in major cities suggests the tremendous opportunity that companies have to launch their sunglass in the market. The reports also suggested that premium brands selling eyewear account for 30% or roughly 2.2 million value worth in the sunglass market in India.
A major factor that must be considered is the growing trends in the consumer market of India, the influx of various foreign brands in the country suggests the openness towards preferring lifestyle goods from abroad. Zahra et al. stated that lifestyle and fashion industry in India is gradually on the rise but a major segment of the market remains unorganized. In order to enter the market, the sunglass company must ensure that they have distinct idea about the market trend in India and various potential both business wise and financially. Another aspect that is of prime importance is the homegrown sunglasses companies in India. They pose a serious challenge to bigger companies since they appeal to every audience irrespective of their income structure. Lovelock and Yip argued that the rise of domestic competition can hamper a new business during their market entry phase and eat up a considerable amount of market share from the overall business.
Market entry strategies must be decided keeping every financial, legal and political matters. If the Indian market is to be assessed for business, it can be suggested that with very few premium brands being recognized by people, it is a must that awareness is created first in order to position itself as a niche quality product for the elite market.
1.2 Impact of market environment in market entry strategy
As per Aaker, the business environment rides specifically on the market environment that is present in a particular country. In the business context, if the company is interested in penetrating the Indian market, it must understand the structure and various activities that make the business run. If the market reports regarding the eyewear market in India is to be judged, it can be clearly noted that the concentration in the eyewear market is highly unorganized. The organized segment comprises of 25% of the market share. This suggests that almost 75% of the market is still unorganized. It only makes it worse when new companies enter the market and double up the competition.
According to Porter, the Indian working philosophy is based on the hierarchical system of work that may not be suitable for many companies coming from abroad. Considering the fact that a considerable portion of the market remains unorganized, it brings a disadvantage, but also has the bright side if the new company can perform exceedingly well. A major factor to be kept in mind is the work philosophy and managerial culture present in the country as it can change dynamic of the business.
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1.3 SWOT analysis of Indian market
A proper SWOT analysis helps in bringing out key factors of positives and negatives that can be used for assessing the best market entry strategy. Considering the fact that Indian market has been selected for the new business entry, an analysis of the strengths, weaknesses and other factors can help in deciding the strategy to be adopted.
- A major advantage that India presents is the extremely wide presence of industries in the private and the public sector. This opens up opportunities to start business as it may be easier to operate business as foreign investment is highly welcomed.
- The fact that costs of labor and human resources are cheaper as compared to other countries, it can help the sunglass business to operate smoothly and save considerable costs on various HR and PR activities.
- According to Kogut (2014), economic stability is a feature that has been ongoing ever since the global economic meltdown. India has certainly shown slow yet positive growth than the rest of the world when it comes to economic growth. This can assure that the new sunglass company may find initial business to be not so strong but eventually they will generate sustainable profits.
- The major flaw in the Indian market is the vastness of trade unions and political labor. This is a point that must be taken seriously by the company before deciding a market entry strategy.
- Poor infrastructure is an area that may hinder the company to operate in the Indian market. Entering the market must be done keeping in mind that no losses are incurred due to this factor.
- Preferences of people in India towards high quality products and services makes the market entry in India much more practical and feasible. Eyewear business has shown immense growth and it is bound to show further progress. This makes selecting Indian market a logical choice.
- Economic progress made by India in recent years is an opportunity that cannot be forgotten as it allows the creation of a financially stress-free market. As per reports, the World Bank suggested that GDP growth shown by India in 2016 was 7.6 % and is predicted to grow to 7.7% in 2017. This fact convinces the positive nature of the business proposition in the Indian market.
- Already existing brands such as Oakley, Prada, Rayban and many others already pose a threat since they have built effective brand recognition in the many years. It will be definitely difficult to introduce the new product among the bigger companies. Market entry may not yield sufficient profits in the first year.
- The rise of domestic companies in the eyewear business also can play a role in the decision to actually enter a competitive market or not. There are certainly the risk of being mixed up with the various brands that already exist.
The SWOT analysis above clearly depicts the positive and negative aspects that the market environment in India provides to businesses. It is up to the company to assess the pros and cons and actually determine whether business will be feasible. However, looking at the strengths that the market provides, the market entry will definitely reap benefits in the future. Knight and Cavusgil (2014) argued that every new business does face an initial stage where they do not generate enough profitable income, but in upcoming years they become sustainable financially. The company must be very specific in selecting the strategy as they do not want to be in a situation where the business strategy does not correlate with the operations that are conducted.
Task2: Critical analysis of the international business strategy
2.1 Objectives to be achieved in Indian market
According to Kim and Hwang (2014), keeping a business strategy in check requires full assessment and thorough idea about the success rate of the business dealings in the chosen market. As per the business objectives that the new sunglass company aims to achieve, their major agenda is to establish business in the country first and that is to be achieved by using Franchising strategy. Every new market entry company first looks to set its feet firmly on the business territory and then begin its aggressive quest to rule the market. The company must first look to enter the market and establish itself in the selected markets chosen for business. Secondly, it must be administered that a proper relationship with suppliers and distributors is made to ensure there is no shortages of product stock. Madhok (2014) argued that a new business finds it difficult to promote itself effectively to convince people of the qualities of the product. In the case of the sunglass company, they must make sure that well placed advertisements are placed in all major geographical locations so that visibility of the company is generated. The easiest way in today’s business environment to promote and launch a new product is to use the social network medium and use its full capabilities for showcasing product features and benefits.
2.2 Franchising strategy implementation
The strategy of franchising has been selected keeping costs in mind and the better reach that the company can establish with the targeted customers. Ekeledo and Sivakumar opined that it is one of the major strategies for established companies to expand their business operations in a new foreign market in order to widen their market base. In this case, the sunglass company has a very niche quality product and the Indian market has been duly selected for this purpose through franchising.
The strategies that the company implements will dictate the results they achieve financially. Keeping this aspect in mind, the first strategy is deciding on the business location hub. The selection of feasible locations will allow them to confirm their status as a competitive company and slowly generate publicity to gather market share needed for sustainable business. Urban cities such as New Delhi, Mumbai, Bangalore and Chennai can provide the best markets due to the niche audience population and the trendy lifestyle in the city. Keeping design factor as per customer preferences is also suggested.
The next strategy that the company will look to achieve is maximum promotion of the brand. This can be achieved by launching their stores all over the selected locations on a particular date. The grand launch of the franchise stores in the selected locations can give the company the desired boost for greater public visibility. A widespread and gala launch inviting the media and dignitaries will help in generating positive press and help in brand image building. Buckley and Casson opined that establishing brand image can be a deciding factor for the future success of a product.
The business must then conduct effective recruitment and training process for young and dynamic employees so that a youth look can be given to the store. The addition of efficient staff will allow the store to cater to everyone irrespective of their gender. Helfat and Lieberman suggested that keeping a quality staff and managers will allow basic maintenance at low costs for the stores and this can help the business initially to sustain its investment. This is to be followed by maintaining a good supply chain management and good distribution network. Doherty argued that the biggest embarrassment arises when a brand is not able to suffice its customers with sufficient product choices. In the case of the company, keeping a strong supply chain will definitely improve inventory management and provide customers variety. This can help the business in the long run.
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2.3 Justification for selecting franchising strategy
Considering the fact that the sunglass company has already an established business, it is necessary that as a brand it must enter a new market using franchises. If the company performed well in the other markets, this suggest their confidence towards their products and its sales performance. Franchising can help the company establish itself as a brand since the objective of the company is to challenge the established premium companies. Erramilli and Rao argued that successful franchising allows confidence to build among franchisors regarding a company and it may help in future development of the business. It is also clear that the company wishes to compete with the big players and that suggests their willingness to have a potent sales proposition that can be achieved through aggressive pricing and top quality products. The existing business of the company suggests that that they have been consistently performing well in the market and it becomes another big reason for the selection of franchising. This suggests their confidence in their business operations as a brand. The best advantage that franchising has is that business model does not change for a company. The sunglass company can plan and execute its operations as per their business needs.
Task3: Critical evaluation of selecting franchising mode of market entry
3.1 Review of the possible success or failure of the franchising strategy
According to Huszagh et al., the implementation of any strategy or plan is deeply decided by the actual implementation and level of success that a company achieves in the new market. It is evident that a new market will present necessary challenges to be faced by a company so the decision has to be very accurate or else the company cannot face the risk of losses in a global market. In the context of the sunglass company in Indian market, the selection of franchising may have its ups and downs. Anderson and Gatignon argued that mere selection of the strategy alone does not confirm radical success, various external and internal factors of the new environment must be thoroughly evaluated to understand the plus points and negative aspects.
Franchising option in the new market does present the opportunity for the company to branch out company subsidiaries, but it must be noted that the existing eyewear business has numerous market players. This raises the bar for the company to produce impeccable quality products for a wider customer base. This must be done adequately so that people can relate to the styling and comfort of the product. The unorganized nature of the business also can hamper business but also provides opportunity to actually gain profits in the first year itself. In a way franchising can help the business carve out its own identity and once that identity is consolidated as a brand, they can really achieve success in the long run. Doherty argued that operations should be conducted keeping the ongoing business models of the company. The best part of franchising is that it allows the utilization of existing business models and saves costs and processes needed for developing a new business model.
Since the company has established its target segment already, it becomes all the while easier for them to use the franchising strategy and adopt measures to segment the target audience as per geographic and income patterns.
However, if the business goals are based on serving as a legal entity in future years, it may not be a good idea to enter the market through franchising. Another drawback of this strategy is the fact that if the company has assumed that they will target only a specific geographic location and a small urban market, then the plan is going to bear disastrous results. Short term-planning is not suited for this kind of a market entry strategy. Leininger suggested that franchisors provide the necessary license to businesses on long term basis and companies must make sure that they honor the license agreement. If the main motive of the business was to initiate business to fulfil short term obligations then the selection of this strategy is not at all suggested.
The major objective of the company should be establishment of the business in overseas market and generate business returns for longer period of time. The selection of best strategy therefore is vital for correct judgement of business goals and the steps the company is ready to take for it.
The business plan clearly helps in determining the major factors that must be kept in mind before entering a new market. The Indian market selection based on the macro and micro environment suggests the fact that there is a positive inclination that the sunglass business can reap benefits in the Indian market. The economic, demographic and cultural aspects make the Indian market suitable for sustainable business. The strategy of franchising should be implemented very carefully as it helps the company to smoothly enter a new market without major resistance. It allows the company unlimited scope to use its existing business model to design methods for operating in the Indian market. The strategies used must include perfect location to ensure maximum footfalls and initiating store launches for an elaborate business. The success of the strategy depends on the clear objectives of the company. If it is the long term business option then they are bound to succeed but if it is just a short term goal then they should look towards other effective market entry strategies.
- Aaker, D.A., (2014).Strategic market management. John Wiley & Sons.
- Anderson, E. and Gatignon, H., (2015). ‘Modes of foreign entry: A transaction cost analysis and propositions’.Journal of international business studies
- Buckley, P.J. and Casson, M.C., (2013). ‘Analyzing foreign market entry strategies: Extending the internalization approach’.Journal of international business studies.
- Doherty, A.M., (2015). ‘The internationalization of retailing: Factors influencing the choice of franchising as a market entry strategy’.International Journal of Service Industry Management.